Centre to include GST compensation in Constitutional Amendment Bill
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New Delhi: The centre has agreed to include compensation to be paid to states for the roll-out the goods and services tax (GST) as part of the Constitutional Amendment Bill.
“The compensation structure would form part of the Bill. It will be paid in tranches to the states,” an official said.
A consensus on this issue will make it easier of the centre to introduce the GST Bill in the coming winter session of Parliament beginning 24 November.
The official further said that the finance ministry has floated a draft cabinet note on GST for inter ministerial consultations.
“The first tranche of compensation to states will be made available in the coming session,” the official added.
However, the official added that further discussions would be needed on revenue neutral GST rate and threshold limit for imposing the levy.
As regards taxation of petroleum products, the centre has proposed to the states that it be made part of the GST Bill.
The states, he said, would get six months time vet the GST Bill in their state assembly after its passage by Parliament.
While a sub-committee on GST has suggested that the revenue neutral rate of GST be pegged at about 27%, the states are yet to decide on it.
It had suggested states GST at 13.91% and central GST at 12.77%.
Differences remain on threshold limit for levying GST with states demanding that annual turnover for imposing the levy be Rs.10 lakh and Centre demanding it to be at Rs.25 lakh.
The GST will subsume indirect taxes like excise duty and service tax at the central level and VAT (value-added tax) on the states front, besides local levies.
The GST Constitutional Amendment Bill, which was introduced in the Lok Sabha in 2011, had lapsed and the National Democratic Alliance (NDA) government will be required to come up with a fresh Bill.
States have been demanding that petroleum, alcohol and tobacco should be kept out of the purview of GST.
As regards the items exempted from the purview of GST, the empowered committee suggested that they should be mentioned in the Constitutional Amendment Bill.
The centre is planning to provide Rs.13,000 crore on account of central sales tax (CST) compensation to states for dues till March 2010 and is likely to seek Parliament nod for the same.